the complexity of context: a service ecosystems approach...

The Complexity of Context: A ServiceEcosystems Approach for InternationalMarketingMelissa Archpru Akaka, Stephen L. Vargo, and Robert F. Lusch

ABSTRACTTo strengthen the theoretical foundations of international marketing (IM), the authors propose a framework for con-ceptualizing the complexity of the context that frames international and global exchange systems. In particular, theyapply a service ecosystems approach, which is grounded in service-dominant logic and its foundational premise thatservice is the basis of all exchange. The proposed framework provides insight into the nature of context, a distinguish-ing feature of IM. The authors argue that the embeddedness of social networks and the multiplicity of institutionswithin a service ecosystem influence the complexity of context. They articulate the way the (co)creation of value influ-ences and is influenced by the enactment of practices and the integration of resources through various levels (micro,meso, and macro) of interaction and institutions. They introduce the concept of “value in cultural context” to empha-size the influence of the symbolic and social components of context. The article concludes with a discussion of theresearch implications for how a service ecosystems view can aid in the advancement of IM theory and practice.

Keywords: service-dominant logic, service ecosystems, value cocreation, marketing theory, institutions

International marketing (IM) has been recognized as a dis-tinctively complex subset of marketing as far back as theinitiation of the discipline (Fisk 1910; Litman 1923).

Early marketing scholars separated the study of IM fromthat of domestic marketing because of the unique issuesassociated with the former, including differences in tastesand habits (i.e., culture), currency, and laws, as well asincreased geographic distances and limitations on commu-nications (Fisk 1910). However, even at the time this bifur-cation occurred, scholars argued that “there is fundamen-tally no difference between international, or what is termedforeign trade and domestic trade” (Litman 1923, p. 3).

This implies that although the context of IM may bemore complex (i.e., comprising more interconnected

and moving parts; e.g., Simon 1996) than domestic con-texts and thus seems more complicated (i.e., more diffi-cult for managers and researchers to study, understand,and analyze), the fundamental mechanisms drivingexchange and value creation remain the same (Bartels1968). Furthermore, Ryans, Griffith, and White (2003)assert that the study of IM is deeply rooted in early eco-nomic theory and a “manufacturing mentality,” whichhas limited the understanding of complex, global phe-nomena that often move well beyond manufacturedgoods. The authors express the need for an underlyingframework to clarify core constructs, especially thoserelated to value and value creation, and to strengthenthe theoretical foundations of the IM discipline.

In this article, we respond to this call by proposing a theo-retical framework for understanding the “complexity ofcontext” that influences and is influenced by social andeconomic exchange (Chandler and Vargo 2011). Rather

Melissa Archpru Akaka is Assistant Professor of Marketing, DanielsCollege of Business, University of Denver (e-mail: [email protected]). Stephen L. Vargo is Professor of Marketing and Shidler CollegeDistinguished Professor, Shidler College of Business, University ofHawaii at Manoa (e-mail: [email protected]). Robert F. Lusch is Jamesand Pamela Muzzy Chair in Entrepreneurship, McGuire Center for Entre-preneurship Executive Director, and Professor of Marketing, Eller Collegeof Management, University of Arizona (e-mail: [email protected]).

Journal of International Marketing©2013, American Marketing AssociationVol. 21, No. 4, 2013, pp. 1–20ISSN 1069-0031X (print) 1547-7215 (electronic)

The Complexity of Context 1

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2 Journal of International Marketing

than distinguishing international from domestic contextson the basis of differences and distances across countries(Fisk 1910), we argue that all social and economic con-texts are complex. Thus, we aim to help managers andanalysts understand the underlying source of complexityin international (and other) marketing contexts by adopt-ing a broader, service-centered and systems perspective.

To this end, we contribute to an evolution in market-ing logic toward a service-dominant (S-D) logic (Luschand Vargo 2006b; Vargo and Lusch 2004, 2008) anddraw on a service ecosystems approach (Vargo andLusch 2011b) for studying and understanding inter-national (as well as domestic) marketing that is notlimited to traditional, manufacturing-centered models.Service ecosystems are “relatively self-contained, self-adjusting systems of resource-integrating actors con-nected by shared institutional logics and mutual valuecreation through service exchange” (Vargo and Akaka2012, p. 207). We argue that a service ecosystemsapproach can help make the complexity of IM contextsmore understandable and less complicated (Lusch andSpohrer 2012; Simon 1996). In other words, we sug-gest that by focusing on understanding systems of serv-ice exchange, rather than challenges or apparent com-plications of particular contexts, IM researchers andpractitioners can better understand and deal with thecomplexities of dynamic social systems (Gloubermanand Zimmerman 2002). In this way, an S-D logic andservice ecosystems approach can potentially provide amore solid foundation for developing international (aswell as domestic) marketing theories and studying thecreation of value both within and across countries andcultures.

The main purposes of this research are twofold: (1) topropose an underlying theoretical foundation to aid inthe development of stronger IM theories, as called for byseveral scholars (e.g., Katsikeas 2003; Nakata andHuang 2005; Ryans, Griffith, and White 2003), and (2) to develop a deeper understanding of the complexityof context through which value is derived in all markets(e.g., local, national, global). We begin by highlightingthe origins of the IM discipline to emphasize its norma-tive economic foundations and then discuss a recentshift in focus on the sources of complexity of IMresearch, theory, and practice (Cavusgil, Deligonul, andYaprak 2005). Next, we introduce an S-D logic, serviceecosystems approach (Vargo and Lusch 2004, 2008,2011b) to aid in clarifying and extending core con-structs related to IM. From this, we propose a frame-work for thinking about the dynamic contexts (Chan-

dler and Vargo 2011) that influence and are influencedby international and global exchange.

Rather than focusing on differences between markets(e.g., foreign vs. domestic), we contribute to a recentshift in IM toward exploring dynamic relationships andchanging perspectives in a global context (Cavusgil,Deligonul, and Yaprak 2005) and understanding howvalue is created through interaction across countries andcultures (Ryans, Griffith, and White 2003). In particu-lar, we propose that the underlying source of complexityin international exchange (Chandler and Vargo 2011) isnot based on differences or distances (e.g., across coun-tries); rather, we argue that the complexity of IM isinfluenced by the increased embeddedness of a multi-tude of social networks and institutions as well as themultiplicity of resource-integrating practices that repro-duce both (Giddens 1984). Finally, we propose the con-cept of “value in cultural context” and discuss theresearch implications for applying this service ecosys-tems approach to the advancement of IM.

COMPLEXITY OF IM

To understand how theoretical advancements can bemade, it is helpful to discuss the origins and recent tran-sitions in the IM discipline. Unlike other marketing sub-disciplines (e.g., services marketing and industrial mar-keting), IM was not developed as an extension oftraditional marketing thinking. Rather, the formal studyof IM, much like that of marketing in general (see Vargoand Lusch 2004), is built directly on the principles ofclassical and neoclassical economics, which were devel-oped throughout the nineteenth and early twentieth cen-turies. Although international trade between Englandand Asia had been occurring at least since the late 1500s(Farrington 2002), the origin of economic and, subse-quently, marketing studies largely grew out of AdamSmith’s (1776) The Wealth of Nations. In particular, thedevelopment of economics is grounded in Smith’s effortto better understand how to create wealth for Englandthrough the international trade of manufactured goods(Vargo, Maglio, and Akaka 2008).

Importantly, Smith (1776) argued strongly for labor(specialized knowledge and skills) as the real measure ofvalue (i.e., value in use; Vargo and Lusch 2004). How-ever, he succumbed to the difficulties of measuring laborand settled on money as the most accepted, albeit nomi-nal, measure of value (i.e., value in exchange). Althoughit was not his intention, Smith’s focus on value in

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exchange (i.e., nominal value or money), rather thanvalue in use (i.e., real value—applied knowledge andskills), laid the foundation of economic and, eventually,marketing studies. In addition, his emphasis on exports,rather than imports, influenced the development of eco-nomic models that measure national wealth on the basisof the production of surplus tangible goods (exporting)and debt (importing), driven by the trade of manufac-tured goods for money.

International Commerce as Complex

Several of the marketing discipline’s pioneering scholars,such as George M. Fisk, Simon Litman, and ArchibaldWolfe (Cunningham and Jones 1997), formalized thestudy of trade-related issues and emphasized the roles ofgoods, money, and merchants in exchange. Early schol-ars differentiated the study of international and domes-tic trade to address particular issues related to the for-mer, such as geographic distances and legal, political,and cultural differences across countries (Fisk 1910;Wolfe 1919). In general, they defined domestic com-merce as trade within the confines of a single countryand international commerce as trade occurring betweenbuyers and sellers located in different countries. Fisk(1910, p. 3) provides a list of problems related specifi-cally to international trade:

1. Differences in the habits and tastes of thepeople, in their language and business customs.

2. Differences in the currency, in weights andmeasure, in legal concepts.

3. Import duties and customs regulations, which areusually so constructed and interpreted as to hin-der the bringing of commodities into a country.

4. Fluctuating rates of exchange.

5. Distance between the exporting and the import-ing country, which makes the establishment ofpersonal contact between buyers and sellersoften more difficult than is usually the case indomestic trade.

Although they separated the study of international tradefrom that of domestic trade, early marketers emphasizedthat the main difference between the two was in the con-text of international markets due to increased “com-plexity” of exchange across national borders (e.g., Lit-man 1923). Initially, the study and practice of IM

viewed the complexity of international exchange to bebased on differences across countries (e.g., laws, cur-rency, culture) and focused on addressing such issues.However, in recent years, increasing interaction acrossnational borders (e.g., Nakata and Huang 2005), theemergence of regional and global markets (e.g., Alden,Steenkamp, and Batra 1999; Tellis, Yin, and Bell 2009),and the growth of global brands (Holt, Quelch, andTaylor 2004) have shifted attention to a view of com-plexity centered on dynamic interactions and intangibleaspects of a global exchange system (Cavusgil, Deli -gonul, and Yaprak 2005). We elaborate this shift inattention from a view of complexity based on differ-ences to one based on system dynamics in the followingsubsections.

Cross-Country Differences. The study of IM expandedbecause of the lack of growth in developed domesticmarkets in the early 1900s (Craig and Douglas 2001). Inthe 1960s and 1970s, increased attention was paid towhere and how products should be sold around theworld (Craig and Douglas 2001; Hess and Cateora1966; Wind, Douglas, and Perlmutter 1973). Fueled byreductions in production costs, an influx of supplierfirms, and an oversupply of manufactured goods, firmstransitioned from being “simple suppliers” to “productinnovators” and then “advocates of their products”(Ryans, Griffith, and White 2003). Scholars in IM beganfocusing more specifically on international strategiesand the management needs of firms (e.g., Wind, Dou-glas, and Perlmutter 1973).

Cavusgil, Deligonul, and Yaprak (2005) recognized thisstage as the “early development” phase of the IM disci-pline, at which time IM studies focused on understand-ing the differences between a firm’s domestic environ-ment and the foreign markets in which it entered orwanted to enter. According to the authors, the earlydevelopment of IM research was built on theories ineconomics, sociology, and anthropology and focused oncross-national and cross-cultural interfaces. During thisphase, IM researchers dedicated their efforts to under-standing issues related to moving goods across countries(e.g., supply chain management), differences in operat-ing and expanding their firms in foreign environments(e.g., internationalization), and variations in consumerpreferences across cultures (e.g., adaptation of products)(Cavusgil, Deligonul, and Yaprak 2005).

In particular, Albaum and Peterson (1984) found thatone of the greatest concerns for IM scholars during thistime centered on multicountry distribution or supply

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chain management and the export of goods across coun-tries. In addition, attention to the process of internation-alization (Cavusgil 1980, 1984), or the increasing of afirm’s international presence, became a primary concernfor those who wanted to engage in or study inter-national exchange. Furthermore, issues regarding cul-tural differences across countries became central to thestudy and practice of moving goods around the world(Ryans, Griffith, and White 2003). For example,increased attention to cross-cultural consumer behaviorcontributed to several studies focused on country-of-origin biases, diffusion of products, and the influence ofnational culture on buying behavior (Cavusgil,Deligonul, and Yaprak 2005).

As communications between the firm and its foreign cus-tomers moved to the forefront of IM research, the debatebetween standardization and adaptation of products andpromotions emerged. This debate raised issues regardingthe best approach for adjusting IM strategy—namely, thefour Ps (price, product, promotion, and placement)—toprovide either a standardized or a customized (adapted)offering in foreign countries (Nakata and Huang 2005).The adaptation/standardization debate continues todayand, as we discuss subsequently, is a major indicationthat an underlying framework is needed to furtherdevelop core constructs in IM and advance the discipline(Ryans, Griffith, and White 2003).

Global System Dynamics. The emphasis on differencesamong countries and cultures has been recently overshad-owed by the need to understand dynamic interactionsbetween firms and customers across global exchange sys-tems (Douglas and Craig 2011). More specifically, sincethe 1990s, IM researchers have paid increasing attentionto “the convergence and consolidation of industries, theconvergence and fragmentation of markets, [and] theadaptation of organizations and demanding customers allover the world” (Cavusgil, Deligonul, and Yaprak 2005,p. 4). Cavusgil, Deligonul, and Yaprak (2005) recognizedthis as the phase of “recent development” in IM, whichhas expanded to address “multiple market challenges”and has led to the development of “indigenous” IMtheories. In particular, IM researchers have more recentlyfocused on understanding the dynamics of intangibleresources (e.g., brands), networks of exchange (e.g.,global supply networks), and emerging and transitioningmarkets (e.g., global consumer culture) (Cavusgil,Deligonul, and Yaprak 2005).

Along these same lines, Douglas and Craig (2011)describe how the central issues in international and

global research have shifted from differences acrossnational borders to the convergence and divergence oflocal, regional, and global markets. They argue (p. 85)that in light of the reconfiguration and increasing inter-connectedness of world markets, “global marketingstrategy needs to be reassessed to adjust to these newand diverse sources of market growth and opportunity.”By moving away from a focus on differences acrosscountries and centering on the emergence of new mar-kets, the authors argue for a “semiglobal” marketingstrategy to address the increase of communication linkswithin and among countries.

In addition to studying changes in market interactions,IM researchers have become increasingly interested inthe development and exchange of intangible anddynamic resources. Clark, Rajaratnam, and Smith(1996) discuss how recent changes in global marketshave drawn attention to the marketing of intangiblesacross countries, particularly “services” (i.e., intangibleproducts). Also centering on the development andexchange of intangible resources, Holt, Quelch, andTaylor (2004) emphasize the dynamics of global brandsand their role in increasing both heterogeneity andhomogeneity across national and other cultural borders.Furthermore, the study of global phenomena has notbeen limited to brands but also includes the study of“global consumer cultures” (Alden, Steenkamp, andBatra 1999) and similarities and differences betweenbuyer behavior and consumption practices around theworld. In their discussion of global positioning and per-spectives, Akaka and Alden (2010) underscore the needto better understand the unique views of and inter-actions among both firms and customers in inter-national and global exchange.

Shifting Views on Complexity

The increased attention to the dynamics of global con-sumer cultures (Alden, Steenkamp and Batra 1999) fallsin line with Douglas and Craig’s (2011) recognition ofconvergences and divergences in global markets and hasraised issues with traditional models of adaptation orstandardization of market offerings and communica-tions across countries (Akaka and Alden 2010; Alden,Steenkamp, and Batra 1999). Table 1 outlines the shiftin focus from the sources of complexity in IM that wererecognized in its “early” development phase (i.e., differ-ences across countries) to sources that emerged in its“recent” development phase (i.e., dynamic interactionsin global exchange systems) (Cavusgil, Deligonul, andYaprak 2005).

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This shift in focus toward dynamic interactions in globalexchange systems has exposed several limitations withtraditional IM theories, many of which were borrowedfrom other disciplines (e.g., Czinkota and Ronkainen2003; Ryans, Griffith, and White 2003). Cavusgil,Deligonul, and Yaprak (2005, p. 6) argue that in the“recent development” phase, “the borrowing oftheories, methods, and axioms from economics, psy-chology, and anthropology has been declining as IMresearchers develop approaches that are more indige-nous to the field.” However, the need for new IMtheories is becoming increasingly clear (e.g., Czinkotaand Ronkainen 2003; Douglas and Craig 2011). This isbecause the dynamics of global contexts continue toreveal the limitations of a logic based on normative,goods-centered theories and manufacturing-based mod-els of exchange (e.g., Ryans, Griffith, and White 2003).

This brief overview of the origins of the IM disciplineand the continuing shift in focus to alternative sourcesof complexity in international and global contexts sug-gests that a deeper understanding of the mechanismsand dynamics of exchange is needed to better under-stand the complexity of the IM context and reconcile itwith the basic drivers of markets and marketing.According to Axinn and Matthyssens (2001), two pos-sibilities exist for reframing and refocusing IM: (1)adapt existing models within the traditional paradigmor (2) innovate and create new models under a differentlens. In other words, IM researchers and practitionerscan continue to adapt and apply models using a “manu-facturing mentality” (Ryans, Griffith, and White 2003)or develop new theories and models using an alterna-tive, service-centered logic (Vargo and Lusch 2004,2008).

Although the first option may lead to a more immediate“fix,” as international markets become increasinglyinterconnected, research problems will likely exacer-bate, and a solid theoretical foundation based on analternative paradigm and the use of new methods(Czinkota and Ronkainen 2003) will only become moreimportant. The following section presents a serviceecosystems approach, grounded in S-D logic, for con-ceptualizing the complexity of the contexts that frameinternational (as well as domestic) exchange. Thisapproach extends prior transitions in IM research byproviding an alternative, arguably transcending frame-work for studying and further developing central con-structs in markets and marketing.

A SERVICE ECOSYSTEMS APPROACH

Vargo and Lusch (2004, 2008) introduced S-D logic toidentify and extend a perspective that seemed to beemerging in marketing (and business in general) by refo-cusing on the primacy of service, rather than the goodsthat are only sometimes involved in its delivery—that is,by reframing “service” (as a concept that transcends andunifies “goods and services”) for thinking about thenature and dynamics of exchange and value creation inmarkets. We argue that S-D logic’s focus on service asthe basis of exchange helps redirect the efforts of inter-national (and other) marketing researchers from fixat-ing on the challenges that have been associated withexchange in apparently unique contexts (e.g., inter-national, services, business-to-business). Rather, a serv-ice ecosystems approach draws attention to understand-ing the fundamental drivers and dynamics of complexsocial and economic systems that influence and are

Table 1. Sources of Complexity in IM

IM Phases Complex Aspects of IM

Early development: cross-national differences

Recent development: dynamics of global exchange systems

• Issues with operating or expanding in foreign environments

• Issues with moving goods across different countries

• Consumer preferences across cultures

• Intangible resources (e.g., brands, services)

• Convergence and divergence of communications and logistics networks

• Emergence and growth of regional and global markets

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influenced by exchange (Vargo and Lusch 2008). In thisway, S-D logic potentially leads to a more robust theo-retical foundation that enables IM researchers todevelop better theories for understanding complex con-texts in relation to fundamentals of exchange, which caninform and be informed by general marketing andrelated disciplines. Furthermore, the development ofpositive theories of international and global exchangecan potentially lead to the advancement of better nor-mative theories to guide managers of international andmultinational (and other) firms.

Service-dominant logic is grounded in ten foundationalpremises (Vargo and Lusch 2004, 2008), which can beconsolidated into four core axioms centered on (1) theapplication of resources in reciprocal service exchange(Vargo and Lusch 2004), (2) the integration of intangi-ble and dynamic (i.e., operant) resources that create newresources (Vargo and Lusch 2004, 2008), (3) the cocre-ation of value through interaction and collaborationwithin networks of actors (Vargo and Lusch 2008), and(4) the importance of the context through which value iscreated and evaluated uniquely by a beneficial actor(Chandler and Vargo 2011; Vargo, Maglio, and Akaka2008). Service-dominant logic and its core axioms pro-vide an alternative framework for further exploring therole of context in exchange and value creation, inter-national or otherwise, as a complex phenomenon ema-nating from a few central constructs—service exchange,integration of (primarily operant) resources, value cocre-ation, and value in context. These cornerstones of S-Dlogic represent a critical foundation for decomposing amore complicated view of context (Simon 1996), whichhas been the main focus of IM research and practice.

Recently, Vargo and Lusch (2011a, b) extended theframework of S-D logic to a more systemic view by intro-ducing the concept of a service ecosystem, which drawson a dynamic systems approach to study the interactionand exchange of service among various stakeholders andemphasizes the role of institutions (Williamson 2000) invalue creation. The overarching implication of a serviceecosystems approach for IM is a deeper understanding ofthe underlying mechanisms that drive multiple levels(i.e., micro, meso, and macro) of interaction (i.e.,resource integration and service-for-service exchange)and shape the unique social contexts through whichvalue is created (Chandler and Vargo 2011; Edvardsson,Tronvoll, and Gruber 2011). That is, building on the cor-nerstones of S-D logic, a service ecosystems view inte-grates a sociological perspective (e.g., Giddens 1984) andemphasizes the embeddedness of simple microlevel

actions and interactions (e.g., dyadic) within more com-plex meso- and macrolevel systems and structures.

A service ecosystems approach emphasizes the idea thatmarket interactions (e.g., service-for-service exchange)occur throughout networks of firms, customers, andother stakeholders and are governed by “institutions”or “rules of the game” (Vargo and Lusch 2011b;Williamson 2000). However, these same institutions arealso composed of human actions and interactions (Gid-dens 1984), and thus service ecosystems are formed andreformed through a recursive relationship between indi-vidual actions and the reproduction of relationships andshared meanings (e.g., social norms and cultures).

Although an S-D logic, service ecosystems approach is aframework, rather than a theory per se, it arguably “rep-resents a first and necessary step toward the building ofa true positive theory of exchange” (Vargo 2007, p. 59).It potentially broadens the scope of IM beyond norma-tive, managerial concerns about cross-country differ-ences and provides insight into understanding thedynamics of exchange relationships in multilevel markets(e.g., local, national, global). This provides a foundationfor furthering the development of IM research in the“recent development” phase (Cavusgil, Deligonul, andYaprak 2005; Douglas and Craig 2011) and addressesthe concern that when marketing is considered from amarket view, the term “international” becomes some-what arbitrary, because all of marketing is part of a sys-tem that has international aspects (Van Rees 1984).

In the subsections that follow, we discuss how S-Dlogic’s reconsideration of the nature of value and pro-cesses by which value is created in markets can poten-tially provide a stronger theoretical foundation fromwhich theories of markets and marketing, internationalor otherwise, can be developed. In particular, this serv-ice ecosystems approach lays a foundation for reconcep-tualizing some of the central concepts in IM. Table 2provides an overview of how a service ecosystemsapproach can help provide a more solid framework forIM studies by connecting prior research on the nuancesand differences of IM contexts with fundamentals ofexchange and value creation. We next discuss a serviceecosystems view of several central concepts in IM—exchange, resources, value, and context.

Service-for-Service Exchange

As with marketing in general, the early development phaseof IM research centered on the exchange of goods through

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importing and exporting across national borders (Cavus-gil, Deligonul, and Yaprak 2005). One of the main areasof research during this time focused on the internationaldistribution of products and management of supply chainsacross countries (Albaum and Peterson 1984). Morerecently, IM researchers have broadened their views to net-works of interaction across multiple local, national,regional, and even global markets (Douglas and Craig2011). However, the source of complexity in this viewremains centered on a firm’s ability (or lack thereof) toexchange tangible goods and create value across countriesin increasingly more interconnected networks of firms,suppliers, and customers. Service-dominant logic shifts thefocus of exchange from the trade and movement of tangi-ble offerings by positing that service—the application ofknowledge and skills to benefit another actor—is the fun-damental basis of exchange (Vargo and Lusch 2004).

Importantly, S-D logic also recognizes that the under-lying nature of exchange (i.e., service) is often maskedby intermediaries, such as goods, money, organizations,and geographic distances, as well as legal, political, andcultural differences, which have been the focus of IMresearch and practice (e.g., Fisk 1910; Litman 1927).However, a service ecosystems approach simplifies theinteraction in exchange systems by focusing on a bal-anced, generic, actor-to-actor perspective (Vargo andLusch 2011b). This approach underscores the contribu-tions of all actors in value creation, including suppliers,manufacturers, retailers, and individual customers, aswell as other actors in customers’ networks (e.g., familyand friends) and actors that control and/or allocate pub-lic resources (e.g., local, state, and national govern-ments, other geopolitical governing organizations).

Rather than focusing on a multitude of different inter-mediaries within global supply chains (e.g., supplier of

raw materials, manufacturer, wholesaler, retailer), S-Dlogic views all actors as resource integrators and cocre-ators of value. For example, a multinational fashionapparel company may consider many internal and exter-nal actors in different countries (e.g., supplier, manufac-turer, wholesaler) in the value creation process, which isrepresented by the outcome of a finished garment. In aninternational context, this traditional, linear model sug-gests that value is created by “producers” in one ormore countries and destroyed by “consumers” inanother country (Normann 2001). However, a serviceecosystems view offers a more networked, intercon-nected, and recursive notion of value creation.

In this view, all stakeholders are interconnected throughshared institutions and the provision of service, andvalue creation occurs throughout the network at eachexchange encounter, rather than at the end of the “valuechain” (Porter 1985). In this way, S-D logic establishesan underlying theoretical framework for studying mar-kets and marketing, international or otherwise, whichshifts the locus of exchange from units of output (e.g., afinished garment) to the processes by which value is cre-ated through interaction among multiple stakeholders(e.g., between suppliers and manufacturers, manufactur-ers and wholesalers, wholesalers and retailers, publicentities). This alternative logic, with its emphasis onservice, both deepens and broadens conventional per-ceptions of value creation and centers on the underlyingmechanisms driving market interactions, particularlythe integration of dynamic, or operant, resources.

Primacy of Operant Resources

Although global intermediaries (e.g., legal, monetary,and political systems) often mask service-for-serviceexchange, the notion of service as the basis of exchange

Table 2. Extending Central Concepts in IM from a Service Ecosystems View

Central Concepts Early Development Recent Development Service Ecosystems

Exchange Import/export Network interactions Service-for-service

Resources Tangible goods Brands and services Primarily operant

Value and value creation Firm’s view on Customer’s view on Multiple views on value/valuevalue/value in exchange value/value in use in context

Context Domestic and foreign countries Local, national, regional, Micro, meso, and macroand global

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is not new or novel. Somewhat ironically, the S-D logicunderstanding of service as the basis of exchange fallsclosely in line with Smith’s (1776) original notions of“real” value and the division of labor. However, Smith’searly emphasis, for convenience, on nominal value, orvalue in exchange (e.g., price), dominated the develop-ment of economic studies and directed economists, andeventually marketers, to study international exchangewith a focus on the trade of operand resources—resourcesthat require action taken on them to be valuable (Con-stantin and Lusch 1994), particularly goods and money(Vargo and Lusch 2004). Alternatively, an S-D logic,service ecosystems approach refocuses the study of IMon “real” value, which was recognized as being derivedthrough labor by Smith (1776) and through theexchange of service by Bastiat and Sterling (1860). Fromthis perspective, IM is driven by the exchange of servicethrough the application of (especially) operant resources—resources that are capable of acting on other resources(e.g., knowledge, skills) to create value (Constantin andLusch 1994).

The difference in emphasis between the exchange ofoperand and applied operant resources is in line withRomer’s (1993) distinction between object gaps andidea gaps in economic development. In particular,Romer suggests that traditional economists focus on thestudy of object gaps or countries that suffer from a lackof physical objects, or operand (e.g., natural) resources.Conversely, those interested in understanding nationalidea gaps—countries that lack the competence necessaryto create value in the modern global economy—need tosupplement formal methods with diverse evidence fromless formal models. Along these lines, a service ecosys-tems view arguably provides a more encompassingframework for understanding how value is created in aglobal economy by focusing on the primacy of dynamic(operant), rather than static (operand), resources inexchange.

The historic strength of many developed countries, suchas the United States, Japan, and Germany, provides agood example of how operant resources are central tothe wealth and well-being of a nation as well as valuecreation. It is evident that it is not the abundance ofnatural resources that has developed the economicstrength of these particular countries. Though in a cur-rent state of flux, these nations’ wealth and historicwell-being have been largely driven by the developmentand exchange of operant resources, such as the knowl-edge, skills, and entrepreneurial spirit of their residentsand citizens. Because human ingenuity and other oper-

ant human resources can arguably be cultivated any-where, S-D logic allows for the consideration and devel-opment of wealth and well-being even in places in whichother natural resources are lacking.

Note that S-D logic does not suggest that the applicationof operand (e.g., natural) resources is not important orthat traditional models are not useful in understandingexchange-related phenomena (Lusch and Vargo 2006a).Although the primacy of operant resources is a centralaspect of a service ecosystems view, this approach doesnot reduce the importance of natural or nationalresources or the need to import and export tangiblegoods. Rather, this service ecosystems view emphasizesthe integration of skills to develop new knowledge (i.e.,learning) (Hult et al. 2000; Lusch, Vargo, and Tanniru2010) to apply (use) resources in a more effective, effi-cient, and sustainable manner. In a global context, thisalternative view raises issues with traditional notions ofnational wealth based on the desire for exports overimports (Smith 1776) and underscores the limitations offocusing on the creation of value driven by the productionand delivery of manufactured goods (Van Rees 1984).

Value Cocreation

In recent years, increasing attention has been paid tocustomer perceptions of value with regard to local andglobal brands and value determined through the use ofmarket offerings across cultures (e.g., Akaka and Alden2010). However, existing literature in IM maintains aview of value creation that describes firms as those thatcreate value and customers as those who destroy value(Normann 2001; Ryans, Griffith, and White 2003).This firm-focused view is reflected in IM’s long-standingemphasis on managerial issues and the “performance ofbusiness activities that direct the flow of a company’sgoods and services to consumers or users in more thanone nation” (Hess and Cateora 1966, p. 4).

Alternatively, the S-D logic, service ecosystems viewreconceptualizes what value is and how it is createdthrough IM efforts by emphasizing the “cocreation” ofvalue (Vargo and Lusch 2008) and recognizing the jointand collaborative efforts among firms, customers, andother stakeholders. According to a service ecosystemsview, IM is driven by the exchange of service and theproposition, acceptance, and evaluation of value amongmultiple actors (Akaka, Vargo, and Lusch 2012) acrossnational and cultural borders. The exchange ofresources is negotiated between actors, often by identi-fying value in exchange (the price a person is willing to

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pay; Smith 1776) for a particular resource. However, aswe discussed previously, value in exchange is only anominal representation of value; the “real value” orvalue in use (Smith 1776) is derived and determinedthrough the integration and application of resources.

This distinction between value in exchange and value inuse has important implications for the study and prac-tice of IM and sheds light on how customer perceptionsof particular market offerings vary across countries(Akaka and Alden 2010). In particular, a service ecosys-tems approach provides insight into the dynamic natureof global brands and how brands can influence culture(Holt 2004), and vice versa, by suggesting that value isalways derived and evaluated by the customer (Merz,He, and Vargo 2009; Vargo and Lusch 2004, 2008). Forexample, the global brand McDonald’s, among others,often takes on a different meaning as it enters differentcountries and cultures (Watson 2006).

Watson (2006) describes the different meanings andsocial norms associated with the interaction betweenMcDonald’s and its customers in a variety of Asiancountries. In general, Asian customers do not embracethe American notion of “fast food” and spend consid-erably more time socializing over a meal at McDonald’s.They also often view McDonald’s food to be more likea snack than a meal and attribute higher status or pres-tige to eating at these establishments than most Ameri-cans would. In this way, the practices, or routine actions(e.g., socializing for hours at McDonald’s), customersenact in different cultural contexts reflect the uniqueexperiences and value created through the exchange andintegration of particular market offerings.

Because of these situational, social, and cultural ele-ments that influence the creation of value in use, Vargo,Maglio, and Akaka (2008) argue that the concept ofvalue in use may not fully capture the phenomenologi-cal nature of value. Thus, they discuss the concept of“value in context” to explicate the contexts that influ-ence the derivation and evaluation of value. In this view,value cocreation is influenced not only by the use of aparticular resource but also by contextual factors,including knowledge, networks of relationships (Chan-dler and Vargo 2011), and social structure (e.g., institu-tions) (Edvardsson, Tronvoll, and Gruber 2011).

Value in Context

Service-dominant logic offers a more dynamic approachto studying global exchange systems because, in this

view, as cross-cultural (e.g., international) interactionoccurs, the relationships among actors in service ecosys-tems (e.g., global markets) continually change. Thisapproach extends prior research in IM that focuses ondistinctions between domestic and foreign contexts(early development phase) as well as the emergence oflocal, national, regional, and global (recent developmentphase) contexts, because it offers a multilevel perspec-tive of context. In particular, S-D logic’s concept of valuein context draws attention to how the cocreation ofvalue is framed by varying levels (micro, meso, andmacro) of interaction as well as a meta layer that reflectstheir evolution over time (Chandler and Vargo 2011).

A service ecosystems approach emphasizes howmicrolevel interactions constitute meso- and macrolevelcontexts. At the micro level, a dyadic interaction (e.g.,exchange between a firm and a customer) frames theintegration of resources by each actor as well as thevalue derived and evaluated from that particularencounter (Chandler and Vargo 2011). In a microlevelinteraction, each actor that engages in exchange isguided by a set of institutions (Williamson 2000), andthe success of the interaction is often dependent on thecongruence (Solomon et al. 1985) of the institutions thatguide the two actors. When similar institutions guide theactors entering an exchange encounter, the interaction ismore likely to be successful. However, if the institutionsdiffer between the actors (which is often the case incross-cultural exchange), the likelihood of a successfulinteraction, in which both parties derive value, may bereduced.

To understand the differences in expectations, it must berecognized that each microlevel interaction is nestedwithin a broader, mesolevel context (Chandler andVargo 2011), which includes additional actors and a dis-tinct set of institutions. Figure 1 illustrates howmicrolevel interactions are embedded within a mesolevel, and because multiple microlevel interactions andperspectives compose meso and macro levels, conflictscan easily arise.

The conflict of perspectives among institutions is espe-cially apparent with the movement of signs and symbols(Venkatesh, Penaloza, and Firat 2006) across contexts.For example, because McDonald’s customers in HongKong were not used to standing in line or havingemployees smiling at them, the company’s first inter-actions with customers were confusing and somewhatchaotic. To remedy this situation and respond to exist-ing institutions, employees were required to hold up

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signs that said they were smiling to be polite and neededto teach customers how to queue up to order their food(Watson 2006).

Conflicts among actors in service ecosystems oftenoccur because actors are connected with multiple net-works (e.g., families, companies, countries), and thustheir roles (i.e., sets of practices) in value creation mayvary depending on the resources and relationships theyhave access to in a given context (Akaka and Chandler2011) and the institutions that guide them (Vargo andLusch 2011b). Thus, as actors draw on different roles,relationships, and institutions to exchange and integrateresources and cocreate value, the micro-, meso-, andmacrolevel contexts continually change (Chandler andVargo 2011; Edvardsson, Tronvoll, and Gruber 2011).The following section offers an alternative perspective

of the complex nature of the social and economic con-text that frames all exchange, which is based on the con-sideration of a service ecosystems view of markets andmarketing. This approach continues to move the focusof IM beyond a view of complexity based on differencesbetween particular markets. It contributes to the under-standing of dynamic interactions among multiple stake-holders and across various economic, social, and cul-tural contexts (e.g., countries, regions), which is ofincreasing interest in IM research (Cavusgil, Deligonul,and Yaprak 2005; Douglas and Craig 2011).

THE COMPLEXITY OF CONTEXT

The complexity of international and global contexts hasbeen a central concern for IM researchers who struggle

Figure 1. Embeddedness of Interactions in Service Ecosystems

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to study a multitude of diverse interactions while con-currently striving to develop unifying theories. As Kat-sikeas (2003, p. 136) elaborates,

On the one hand, [IM researchers] are encouraged(e.g., by reviewers) to develop an understanding ofall interactions and consequences pertaining to themultidimensional nature of the international envi-ronment studied. But, on the other, it is importantto maintain a level of theoretical abstraction so asto capture the big picture and develop meaningfultheory.

This “conundrum” makes it difficult for internationalresearchers to “synthesize” prior research and general-ize important findings, especially taking into considera-tion the countless national and transnational contextsthat are of concern to IM academicians and practition-ers (Katsikeas 2003).

Dynamics of Social Context

We argue that the service ecosystems approach providesan alternative, and arguably unifying, approach forstudying IM, which can help bridge the gap betweenefforts to understand a multitude of diverse contexts andefforts geared toward developing underlying theories fordynamic systems of exchange. In particular, S-D logic’semphasis on service reconsiders the resources and pro-cesses involved in value creation and stresses the com-plexity of all contexts through which value is derived andevaluated. More specifically, a service ecosystems viewsuggests that the complexity of social context that framesvalue creation and exchange (Chandler and Vargo 2011)is influenced by (1) the diversity of resources, (2) themultiplicity of institutions, and (3) the enactment of aplethora of practices in a particular context.

Diversity of Resources. The primacy of operantresources in exchange systems is evident in recent stud-ies on global supply chains, which center on the impor-tance of learning (Hult et al. 2000) and the empower-ment of employees (Locke and Romis 2007) throughoutnetworks of international organizations. At a microlevel, individual employees interact with other individu-als and learn through their interactions and the valuethat is (or is not) derived through exchange. At a mesolevel, organizations (or “industries”) are consideredintegrative entities, which are made up of networks ofoperant (and operand) resources (Akaka, Vargo, andLusch 2012), particularly the collective competences ofindividuals (e.g., employees) and groups of people. In

this view, value creation within global supply chains isdriven by the integration and application of operantresources within mesolevel networks (e.g., organi-zations, industries) that interact across national and cul-tural borders. However, the same can be said for moremacrolevel networks, such as countries, that engage inexchange as well. When the focus on operant resourcesis elevated to an international level, the issue of scarceresources can be viewed with an emphasis on the needto generate operant resources to develop a nation’s col-lective knowledge and skills, or close its “idea gap”(Romer 1993).

Note that the scarcity of natural resources has been along-standing concern with regard to international andglobal exchange. According to Litman (1927, p. 4),“generally speaking, foreign trade is undesirable when itleads to the depletion of a country’s resources.” How-ever, within an S-D logic, service ecosystems view, whatmight be considered a resource to some may be consid-ered a resistance to others. This is because, in this view,“resources are not; they become” (Vargo and Lusch2004, p. 3). For example, a natural resource, such aswater, might be considered either a resource (e.g., in thecase of a drought) or a resistance (e.g., in the case of aflood), depending on a particular context.

An S-D logic, service ecosystems view stresses thatresources are always “becoming” (Vargo and Lusch2004). This approach shifts a singular focus on eitherthe preservation or the accumulation of scarce, operandresources toward the integration and generation ofadaptive, operant resources, which can reduce resourcedepletion, or increase availability, and create alternativeservice solutions. In this view, it is the perspective andknowledge of people, such as employees, customers, andother stakeholders, that differentiates resources fromresistances and drives value creation in both global andlocal markets.

Multiplicity of Institutions. Although the discussion ofvalue cocreation has largely focused on the interactionbetween firms and customers (Prahalad and Rama -swamy 2004), a service ecosystems view also regardsnetworks of stakeholders (e.g., suppliers, governmentagencies, nonprofit organizations) and social and eco-nomic factors as endogenous resources for value cocre-ation (Lusch and Vargo 2006a). In particular, theembeddedness of social networks (Akaka, Vargo, andLusch 2012; Chandler and Vargo 2011) and the influ-ence of intersecting and overlapping institutions (e.g.,social norms) (Edvardsson, Tronvoll, and Gruber 2011;

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Vargo and Lusch 2011b) are central drivers of bothinteraction and value cocreation.

In this dynamic view, networks and institutions are notexogenous or static. Rather, they are both continuallyreproduced through the practices that actors enact tointegrate resources and cocreate value (Vargo andAkaka 2012). Thus, we argue that the complexity ofcontext is influenced not only by the embeddedness ofsocial networks (e.g., local, national) but also by themultiplicity of institutions (social structures) within agiven ecosystem (Sewell 1992). In addition, signs andsymbols play a central role in coordinating interactionsthrough the integration of shared institutions, withinsocial systems driven by service exchange (Venkatesh,Penaloza, and Firat 2006).

Importantly, institutions have been recognized as acritical consideration for understanding dynamics ofinternational and global markets (Peng, Wang, andJiang 2008). One of the most popular considerations ofthe effects of institutions in international exchange cen-ters on the influence of national cultures on managersand their actions. Hofstede’s (1980) five dimensions ofculture—individualism, uncertainty avoidance, mas-culinity, power distance, and long-term orientation—arethe most common cultural approaches for studying theeffects of institutions on attitudes and behavior (Griffith2010). With regard to institutions, Hofstede et al.(2002, p. 800) argue that “institutions are the crystal-lizations of culture, and culture is the substratum ofinstitutional arrangements.” In their view, institutionsare formed from national culture and cannot be sepa-rated or altered because they are “patterns of thinking,feeling and acting that differentiate one country fromanother and continue to be transferred from generationto generation” (p. 800).

Alternatively, Griffith (2010) argues that a closer exam-ination of institutions can provide a more dynamic andmultidimensional view of global markets. In his view,“institutional elements are not static in nature but ratherever evolving through integrative efforts” (p. 60). Thisdynamic view of international and global markets fallsin line with Wollin and Perry’s (2004) argument formarkets as “complex adaptive systems,” from whichorder emerges through the interactions of many inter-dependent actors rather than from an external guidingforce. The authors emphasize the social embeddednessof markets but also discuss how the “multi-level archi-tecture of complex adaptive systems both enables andconstrains the system” (p. 563). In particular, they shed

light on how different levels within a system drive sta-bility or change by arguing that “discontinuous and rev-olutionary change occurs when deep, more-fundamentallevels are disrupted. Changes at more marginal levels aremore incremental” (p. 563).

This consideration of the depth of level within serviceecosystems is especially important for the study of IMbecause it suggests that changes made at more funda-mental or central levels of context drive larger changesthan those that occur at broader or more marginal lev-els. In other words, by focusing on central drivers ofchange, IM researchers and practitioners will betterunderstand how radical shifts in higher-level systemsand structures (e.g., global) occur.

Enactment of Practices. According to Schatzki (1996, p.11), “[practices are] the central social phenomenon byreference to which other social entities such as actions,institutions, and structures are to be understood.” Inthis way, changes in daily or routine actions can havesubstantial impacts in the wider social system, or serviceecosystem. Giddens (1984) provides additional supportfor the relationship between human actions and inter-actions (i.e., practices), embedded networks, and institu-tions. His theory of structuration posits that both sys-tems (i.e., social networks) and structures—rules (i.e.,institutions) and resources—are reproduced through theenactment of practices. Sewell (1992) extends Giddens’sview and emphasizes a more dynamic approach forunderstanding intersecting and overlapping institutionsby elaborating on the “multiplicity of structure.” Thissuggests that in service ecosystems, institutions are alsonested within and intersect with other institutions andthat these “rules” of the game (Williamson 2000) arenot always congruent. Underscoring the centrality andvariation of practices in social systems, Swidler (1986)suggests that actors draw on varying “repertoires” ofpractices depending on their social context and that theenactment of different practices also helps shape thesocial structure.

With regard to value cocreation in service ecosystems,Edvardsson, Tronvoll, and Gruber (2011) draw from theliterature on practices (e.g., Giddens 1984) in their dis-cussion and conceptual development of “value in socialcontext.” Along similar lines, Chandler and Vargo(2011, p. 38) argue that “actors can be said to be par-tially defined by their context while their contexts can besaid to be partially defined by [the actors].” Thus, in aservice ecosystems view, as actors enact various practicesand engage in exchange with different actors across dif-

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ferent cultures, the context through which value isderived changes as well (Akaka and Chandler 2011).However, note that what primarily drives these inter-actions between and among actors is the need to inte-grate and apply resources to create value for themselvesand others (i.e., service-for-service exchange). Thisnotion highlights the centrality of value cocreation in IMby broadening the scope of value creation beyond thefirm and providing a dynamic perspective of multileveland multidimensional contexts that frame internationalexchange. Figure 2 depicts the critical roles of institu-tions and practices and how they constitute social con-texts as actors integrate and (re)create (i.e., innovate)various resources in their efforts to create value.

When value is cocreated across countries, the multi-plicity of institutions and cultural aspects of contextoften become more salient. This is because wide varia-tions in institutions within international and global con-texts influence the interaction among different stake-holders and their relationships as well as their perceptionsof value. Furthermore, as actors interact, they shape thecontexts through which unique evaluations of value arederived (Chandler and Vargo 2011; Edvardsson, Tron-voll, and Gruber 2011). In this way, as firms, customers,and other stakeholders interact (partially through insti-tutions) to cocreate value for themselves and others,they concurrently contribute to the cocreation or re-creation of markets as well. Diverse perspectives andmultiple meanings are connected by the roles actorsenact (Akaka and Chandler 2011) and the rules thatarise as guidelines (i.e., institutions) for interaction (e.g.,service exchange).

Although the embeddedness of social networks is a cen-tral factor influencing the complexity of context, adeeper exploration of the drivers of interaction is neces-sary to understand the dynamics of these social contexts.As we noted previously, a service ecosystems view high-lights the importance of institutions that guide each(micro, meso, and macro) level of interaction. In addi-tion, a service ecosystems approach considers a “metalayer” (Chandler and Vargo 2011), which provides insightinto how different levels of interaction relate and evolve.In this view, it becomes evident that the complexity ofcontext is also a function of overlapping, intersecting,and even conflicting institutions, rather than fixed differ-ences (e.g., in laws, currencies, language) across coun-tries or cultures (e.g., Hofstede 1980).

Cocreation of Value in Cultural Context

Service-dominant logic’s service ecosystems view providesa dynamic lens for conceptualizing both institutions (Grif-fith 2010) and cultures (Craig and Douglas 2006) ininternational and global markets by explicating variouslevels of context—micro, meso, and macro—throughwhich value is created. In other words, a service ecosys-tems view encompasses different levels of interaction aswell as the relationships among them. As indicated, thisview draws attention to the role of signs and symbolswithin the context of markets (Venkatesh, Penaloza, andFirat 2006) and regards political and legal institutions asendogenous to value cocreation processes as well.

Williamson (2000) considers culture the highest level ofan institution that influences and is influenced by otherinstitutions (e.g., legal, political, economic). This high-lights culture as a level of context composed of multiplelevels of institutions that intersect, overlap, and are con-tinually integrated with other operant (and operand)resources to cocreate value. From this view, the cocre-ation of value is driven by the integration and exchangeof resources among multiple actors, such as firms, cus-tomers, and even countries. Because a single actor can-not create value, resources are integrated and applied(service is provided) as value propositions are offered inexchange for the applied resources of others (service).

The concept of value in cultural context extends a viewof social context (Edvardsson, Tronvoll, and Gruber2011) and includes the signs and symbols that influenceand are influenced by interaction and exchange(Venkatesh, Penaloza, and Firat 2006). In internationaland global markets, this broad view of context incorpo-rates multiple levels of interaction and intersecting and

Figure 2. Dynamics of Social Context

Notes: Adapted from Orlikowski (1992) and Vargo and Akaka (2012).

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overlapping institutions but suggests that driving theformation and reformation of these meso and macrolevels of structure is the enactment of practices and thecocreation of value. In other words, this frameworkhelps decompose the complexity of context (Simon1996) and refocus the initiative of IM on understandingthe fundamentals of value creation and exchange. Fur-thermore, this view of cultural context emphasizes thephenomenological and heterogeneous nature of value(Vargo, Maglio, and Akaka 2008) by considering themultiple participants, perceptions, and practices thatinfluence the creation of value. This conceptualizationof value in cultural context has important implicationsfor several issues in IM because it emphasizes the role ofthe customer and other stakeholders in value creation.

RESEARCH IMPLICATIONS

The conceptualization of value in cultural context offersa more dynamic view of culture than conventionalframeworks in IM, which center on how collective val-ues influence individual behaviors (e.g., Hofstede 1980).More specifically, the proposed framework suggests thatthe actions and interactions in which individual actorsengage both influence and are influenced by a multitudeof institutions (i.e., social norms) and resources (e.g.,symbols). This view of value in cultural context alignswith Griffith’s (2010) multilevel approach for institu-tional analysis, which varies among global, regional,and national levels of institutions. In his view, globalintegration is the highest order of institutions, and vari-ous institutional elements—social, political, and legal—converge within and among different levels. This multi-level view emphasizes the way conflicts can arise inmultilevel contexts as firms enter foreign institutionalenvironments and struggle to gain legitimacy, oftenthrough adaptation of products or messages, within aparticular national market (Yang, Su, and Fam 2012).

Thus, what makes international and global contextspotentially more complex than domestic contexts is notso much the differences across contexts or the dynamicsof interaction; rather, the complexity of internationaland global contexts is based on the increased embedded-ness of microlevel actions and interactions within a mul-titude of meso- and macrolevel institutions as exchangeoccurs across countries and expands around the world.In this service ecosystems view, culture is considered adynamic phenomenon, comprising multiple institutions(Williamson 2000), that influences and is influenced bythe cocreation of value among multiple stakeholders

across the globe. We discuss the research implicationsand potential contributions of an S-D logic, serviceecosystems approach and a focus on value in culturalcontext with regard to two major areas of research inIM: (1) adaptation/standardization and (2) emergingand transitioning markets.

Beyond Adaptation Versus Standardization

The standardization/adaptation debate has been centralto the development of IM theory and practice for morethan 40 years (Ryans, Griffith, and White 2003; Theo-dosiou and Leonidou 2003). The decisions to standard-ize or adapt marketing strategy have involved productdevelopment as well as advertising and other communi-cations (Agrawal 1995; Levitt 1983; Papavassiliou andStathakopoulos 1997). Although extensive research hasattempted to identify ideal conditions for implementingstandardization or adaptation strategies (or some com-bination of both) in global markets (e.g., Agarwal, Mal-hotra, and Bolton 2010; Agrawal 1995; Alden,Steenkamp, and Batra 1999), the effectiveness of thesestrategies remains unclear. In particular, Ryans, Griffith,and White (2003) suggest that the limitations of thisresearch stream are tied to the lack of conceptual devel-opment and understanding of value and value creationin IM. The authors suggest (p. 596) that IM researcherscan “no longer simply assume the relationship betweenvalue delivery and performance, but rather [must]explore the issue of value delivery directly.”

Ryans, Griffith, and White’s (2003) recognition of theneed for a “broader conceptualization of value” pro-vides evidence that the adaptation/standardizationdebate maintains a view on value that is largely firmcentric. We argue that the S-D logic, service ecosystemsapproach can help provide a unified framework that canpotentially transcend this debate by moving the focusfrom value as created by the firm to value as collabora-tively created among multiple stakeholders. In otherwords, by considering both the positioning of the firmand the perspectives and practices of customers (andothers) (Akaka and Alden 2010) across countries andcultures, a service ecosystems view can provide a richerand more robust framework for the study and practiceof IM.

This shift to “marketing with” customers moves IMstrategy away from a firm-centric orientation to a stake-holder orientation (Lusch and Webster 2011) based onvalue cocreation. In this view, markets “become” (Kjell-berg et al. 2012)—are created and reproduced (Giddens

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1984)—because they are continually reformed throughthe actions (i.e., practices) and interactions (e.g., valuecocreation) among multiple stakeholders (Edvardsson,Tronvoll, and Gruber 2011). This dynamic view ofvalue creation sheds light on both the homogeneity andthe heterogeneity—how market-related norms andmeanings are both converging and diverging—withinlocal, regional, and global markets and cultures (Griffith2010).

With regard to IM strategy, the concepts of value cocre-ation and value in context imply that, rather than seg-menting customer characteristics and targeting customersthrough standardization or adaptation techniques, man-agers can consider the social and cultural contexts thatframe particular market interactions and focus on con-tributing to the (re)formation of new or emerging mar-kets. In general, the consideration of cocreation of valuein cultural context offers a broader and more integrativeapproach to market identification. This view centers onhow actors enact routine practices to create value (i.e.,benefit) for themselves and for others by drawing onand contributing to a multitude of institutions that com-prise various levels (micro, meso, and macro) of socialand cultural contexts and frame value creation andexchange (Chandler and Vargo 2011; Edvardsson,Tronvoll, and Gruber 2011) (see Figure 1).

Coevolution of Markets and Culture

As noted, this view of cocreation of value in cultural con-text offers a dynamic and multilevel view of institutions,which draws attention to both heterogeneity and homo-geneity within and across cultures (national or other-wise). Furthermore, this service-centered perspective onculture sheds light on how local, regional, and globalmarkets and cultures emerge and converge (Cavusgil,Deligonul, and Yaprak 2005; Douglas and Craig 2011).Importantly, it is the enactment of practices and inter-actions among stakeholders that continually (re)shapethe social and cultural contexts (e.g., local, national, andglobal markets) through which value is created and eval-uated (Giddens 1984). Tobin (1992) provides evidence ofthe cocreation of value in cultural context by highlight-ing the cultural change that occurs through the inter-actions between firms and customers across national cul-tures. He emphasizes the influence of the integration offoreign practices, signs, and symbols on the “remaking”of Japan’s national culture.

This service ecosystems approach to markets clearlymoves IM beyond its managerial and production focus

and has important implications for academicians andpractitioners struggling with current issues in this field.The conceptualization of value in cultural context canhelp make culture a more relevant and useful construct,which researchers have called for in IM (Singh 2007),and also provide deeper insights into cross-cultural“consumer” research (Craig and Douglas 2006; Dou-glas and Craig 1997). Because perspectives of value varywithin a particular network, ongoing interactions drivesocial and cultural change (Chandler and Vargo 2011;Penaloza and Mish 2011). In this way, cross-cultural orinternational exchange integrates diverse markets andcultures, which represent various levels of institutions(Griffith 2010; Williamson 2000), that coevolve as prac-tices are enacted and interaction among multiple actorsoccurs (e.g., Djelic and Ainamo 1999; Holbrook 2003;Lewin and Volberda 1999). In this view, the focus of IMresearch shifts from a restricted, normative initiative—determining how firms should market to customers inother countries—to a positive one—understanding howvalue is cocreated across cultures and how markets formand reform (e.g., grow). In turn, this will allow for thedevelopment of more robust normative theory (Hunt2002).

In line with this coevolutionary, service ecosystems per-spective, a distributive view of culture (Arnould andThompson 2005) and the recognition of global con-sumer cultures (Alden, Steenkamp, and Batra 1999) sug-gest that culture is actually a dynamic, organic phenom-enon that can change and be changed (Yaprak 2008).The dynamic nature of culture is most evident in thechanges in cultural practices, such as celebrating Christ-mas in Japan (Kimura and Belk 2005), and the emer-gence of new transnational (Cayla and Eckhardt 2008)and global (e.g., Alden, Steenkamp, and Batra 1999;Cleveland and Laroche 2007) cultures. Additional evi-dence of coevolution in global markets appears in Djelicand Ainamo’s (1999) study of the global fashion indus-try and the changes that took place in organizationalforms of fashion firms in France, Italy, and the UnitedStates from the 1960s to the 1990s. The authors findthat historical legacies and institutional constraintswithin each country led to the emergence of differenttypes of organizations within the same global industry.Importantly, the authors argue that it was the interplaybetween the environment and organizations that ulti-mately led to the development of distinct fashion mar-kets in each country.

Although cultures, particularly national cultures, aretraditionally considered static (e.g., Hofstede 1980),

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recent research suggests that cultures are dynamic andchange over time and space (Yaprak 2008). By focusingon practices as the foundational social aspects of valuecreation in service ecosystems, IM researchers can betterunderstand the origins of broader meso- and macrolevelchanges. The service ecosystems approach proposedherein suggests that these changes in culture are, at leastin part, driven by the enactment of new or differentpractices and interactions among multiple stakeholdersacross countries and cultures. In other words, valuecocreation drives market (re)formation and changes thelandscape of local, national, regional, and global mar-kets. This is because as actors enact practices and inte-grate resources across countries and cultures, they areguided by diverse institutions, both complementary andcontradictory. The integration of different perspectivesof value and enactment of different practices within aparticular local, regional, or global context can poten-tially lead to the development of new forms of value,new markets, and even new cultures.

CONCLUSION

The study of IM has progressed in recent years throughincreases in technical rigor and an increasing emphasison social and environmental issues (Czinkota andRonkainen 2003; Nakata and Huang 2005). Althoughthe development of the discipline continues to advanceresearch methodology (Nakata and Huang 2005), iden-tify important differences across national cultures (Hof-stede 1980), and extend the scope for studying inter-national exchange (Czinkota and Ronkainen 2003),several scholars have argued that stronger theoreticaldevelopment for IM is required (e.g., Axin andMatthyssens 2001; Nakata and Huang 2005; Ryans,Griffith, and White 2003). In this article, we proposeand elaborate S-D logic and its service ecosystems view(Vargo and Lusch 2004, 2008, 2011b) as an alternativelens for developing and strengthening the theoreticaldevelopment of the IM discipline, which transcends (butdoes not replace) the traditional production-oriented,goods-centered paradigm.

More specifically, we applied a service ecosystemsapproach to reconsider central constructs in IM—exchange, resources, value, and context—from an S-Dlogic view. In addition, we explored the complexity ofcontext from a service ecosystems lens by articulatinghow micro-, meso-, and macrolevel interactions relateand evolve. We extended this view of embedded socialnetworks with a discussion of the importance and multi-

plicity of institutions in value creation. We then discussedhow networks and structure are both reproducedthrough the enactment of practices within and acrossvarious (e.g., local, global) contexts. The proposedframework depicts the process by which microlevel inter-actions (e.g., service exchanges) (re)shape meso- andmacrolevel institutions through the integration and gen-eration of new resources. In addition, we discussed theconsideration of cocreation of value in cultural contextas an extension of social context (Edvardsson, Tronvoll,and Gruber 2011), which draws attention to multiplelevels of institutions in cultures (i.e., multiplicity of struc-ture) and emphasizes symbolic, as well as social, aspectsof the context through which value is derived.

In this article, we argue that a service ecosystems viewcan provide a unifying and underlying framework foradvancing the IM discipline. This is because S-D logicintegrates, rather than disregards, prior research onwhat have been considered “complexities” in IM andreconciles unique features of international and globalcontexts with the underlying basis of value creation andexchange (Vargo and Lusch 2008). Although this shiftin thinking provides a framework for the redevelopmentof the theoretical foundations of IM, much workremains to advance the development of a positive, service-centered theory of markets (Vargo 2007) thatincludes local, national, and global contexts.

A reframing of thinking about exchange and value crea-tion from a service ecosystems lens provides a broaderbut realistic scope for traditional research topics in IM.For example, the market entry decision, and whether toenter the market by licensing, export, joint venture, orforeign direct investment, becomes a study of institu-tions and networks of actors that weave in and out ofnational borders as well as micro, meso, and macro lev-els of interaction and analysis. As this analysis unfolds,managers and researchers can begin to regard risk asmuch more than political or legal restrictions; rather,risk becomes associated with the challenge of engagingin exchange within embedded cultural contexts andmultifaceted networks and includes supply chain risks,intellectual property risks, human resource risks, andrisks in brand equity. Through the dynamic lens of serv-ice ecosystems, the voice of the market can be heardthrough social media and other communications thattranscend geopolitical borders.

Within this framework, meaning emerges among bothsimilar and diverse actors as they construct the socialnature of their reality. Similarly, research and develop-

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ment and innovation are punctuated by human resourceand financial flows across national borders. Innovationis no longer what occurs within the firm but somethingthat emerges through in an ever-evolving service ecosys-tem, in which it is massively cocreated. Global supplychains morph into global human resource systems ofservice-exchanging actors, in which liquefied informa-tion makes distinctions between offshoring and domes-tic business increasingly less relevant. It also becomesclear that the use of multiple methods is almost impera-tive rather than optional. Furthermore, a multimethodapproach to understanding service ecosystems on aglobal level helps simplify what seems complicated tothe untrained observer. The complexity does not vanishthrough the skylight but becomes an integral part of themindset of those using an S-D logic and multimethodlens. Put simply, this approach enables them to viewcomplexity as nested interactions among multiple actorsrather than as a mushy, fuzzy, complicated mess.

This article has begun to address the need for developinga stronger theoretical foundation for IM, by highlightingthe applicability of an S-D logic, service ecosystems viewand proposing a framework for conceptualizing the com-plexity of the contexts that frame international andglobal exchange. However, Hunt (2002, p. 236) sug-gests that the development of a solid positive theoryinvolves the formation of “systematically related sets ofstatements, including some lawlike generalizations, thatare empirically testable and that increase scientificunderstanding through the explanation and predictionof phenomena.” Thus, to develop such theories for IM,empirical research is necessary to investigate how theenactment of practices influences the cocreation of valueas well as shared institutions and collective meanings,particularly across distinct, perhaps national, cultures.Furthermore, longitudinal research is required to betterunderstand how microlevel changes (i.e., changes inpractices) may lead to meso- and macrolevel shifts inmarkets and cultures.

The service ecosystems approach and conceptualizationof value in cultural context draw attention to the needto study international and global markets, because thesecontexts are highly embedded and emphasize the multi-ple levels of networks and institutions often associatedwith value cocreation and service-for-service exchange.However, the development of a positive theoreticalfoundation of markets is no simple task. Arguably, thedifficulty of the task increases when dominant para-digms remain and restrain the development of radicallydifferent ideas. However, given the evolution of IM and

the limitations of a manufacturing mentality, this shift inthought seems optimal, if not required, to gain a deeperunderstanding of the dynamics and complexities ofglobal contexts and the underlying drivers of inter-national exchange.

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